Is this really an edge?

Using a 5-min chart, wait for the first 30 minutes to establish intraday support and resistance, then sell the first lower high of the day or buy the first higher low of the day with a stop placed just outside the lower high or higher low.

Look at some of the popular day trading stocks Friday and notice how this tactic would play out:

AAPL short for a $3/share gain
BIDU short for a break-even stopout or a small scalp
CAL short for a .45/share gain
X long for a .60/share or better gain
POT short for a 1.00/share or so gain
HIG short for a break-even stopout

And this edge still managed to work on a day when the largest move for most stocks was over in the first 30 minutes.

I agree that leverage is required to make big bets, but don't ever confuse leverage with an actual EDGE.

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This was posted on neke's journal thread, but I reverse-hijacked it and brought it here so as to allow that thread to stay on topic (may be too late already )

So is the above actually an "edge"? Can I ask, what is the difference between the parameters listed above, and instead just saying "sell the high of XYZ and set stop at new high" (after 30, 60, 120 minutes etc)? When looking at any chart in hindsight, wouldn't what I just wrote work absolutely perfectly, each and every time? What do you think would happen if you tried to apply this "edge" in real time?

... then sell the first lower high of the day or buy the first higher low of the day with a stop placed just outside the lower high or higher low.

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The only problem I see is just how are lower highs and higher lows determined as they unfold in real time? Suppose you get in at the higher low (so you think) and price does in fact moves up for the next few minutes (usually up to the previous pivot high that precedes the second low or the higher low). But it quickly reverses and goes below the previous higher low.

That doesn't mean it's not tradeable. In all fairness, might I add that higher lows are one of the best entry methods but it takes more than just eyeing prices. You'll also need to know about momentum and whether it aligns with support, etc.

That sounds like a daytrading firm telling you how to trade. Short tern moving averages don't work well for anything if you are trying to trade consistently with even a bit of leverage, otherwise anyone with a basic system plugged into the Market would make money.

Similar trading patterns have been described by a number of people, including Raschkeâs âTurtle Soupâ and Trader Vicâs 1,2,3 set ups. It is one of my favorite set ups to catch reversals, and if you have disciplines waiting patiently and sticking to you stops, you have a slight edge there.

However, in real time day trading, there are a few problems:
1. As Saliva says, how do you know it is a LH or HL as it develops?
2. If you do not get stopped out in the next few bars, where do you exit?

To make it an edge, you have read price action and ask more questions, such as: What is the market internal doing? For example, last Fridayâs examples are good for shorts since market keeps going down. How the stock behaved the last two days and where are the levels? Do I exit the next level and take profits or let it run since I am likely have catched a true reversals and let it ride, etc. etc.

The true edge is in the âArtâ, if you have discipline and money management, over time, trading this kind of patterns will become your edge for sure.

This was posted on neke's journal thread, but I reverse-hijacked it and brought it here so as to allow that thread to stay on topic (may be too late already )

So is the above actually an "edge"? Can I ask, what is the difference between the parameters listed above, and instead just saying "sell the high of XYZ and set stop at new high" (after 30, 60, 120 minutes etc)? When looking at any chart in hindsight, wouldn't what I just wrote work absolutely perfectly, each and every time? What do you think would happen if you tried to apply this "edge" in real time?

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if that's an edge then i must be einstein

no disrespect to you or nodoji but we all know an edge is something far beyond chart patterns.

m&a, insider trading, algorithmic arbitrage, stock drift (also known as trends), and so on are examples of an edge per se.

just model it and backtest it for 5 to years in 500 symbols. i am pretty sure that when you add commissions and slippage the strategy would turn negative. obviously there will be some symbols that did fine but that doesn't mean they'll continue to do in the future. cherry picking in hindsight is obviously not an edge.

This was posted on neke's journal thread, but I reverse-hijacked it and brought it here so as to allow that thread to stay on topic (may be too late already )

So is the above actually an "edge"? Can I ask, what is the difference between the parameters listed above, and instead just saying "sell the high of XYZ and set stop at new high" (after 30, 60, 120 minutes etc)? When looking at any chart in hindsight, wouldn't what I just wrote work absolutely perfectly, each and every time? What do you think would happen if you tried to apply this "edge" in real time?

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Heard about something like this numerous times with 15 min candles, you sell under the first 15 min. candle and buy above first 15 min candle, place your stops if and when the stock reverses back to the 15 min candle. This can work wonders if:
1) you have the sector/industry/market trend going your way (up if you buy down if you sell)
2) if you spot the industry leader(s) for the day and ride the trend, and:
3) LEARN WHEN TO TAKE PROFITS! (something Im working on)

Many may argue this final point, but I am (slowly) beginning to grasp that the exit is actually more important than the entry

Look it's pretty simple, don't over-think things. Just know your market inside and out. Know all the reasons why prices would move, know the players, the time-frames, the data points. Know where you fit in within all that. Know enough to deserve to make money -- does that make sense? Think you can just walk into a ring with a pro boxer and take a few rounds from him without ever having taken a punch in your life? That's pretty much the analogy for those starting out.

I see all these threads from very intelligent people who are taking their first stabs at this business, they look at the market from UP THERE, rather than DOWN HERE where all the action takes place. Are you planning on making money from trading (ie, buying lower/selling higher), or are you going to write a book? If it's trading, then your primary focus by far should be PRICE, cuz that's the one and only place where your fingers will ever actually make contact with the market. Where your decision-making impacts both your account and the market itself. Why bother starting anywhere else?

The immediacy of trading just gets completely lost in all the theoretical mumbo-jumbo of what "should" work. Efficiency to a trader is pretty much bs; what matters more is how much inefficiency your account can handle before you become just another agent of said inefficiency getting blown out of your positions. When you look at prices on the screen, think about what it is exactly that is making these prices move. Where does that impetus come from? Those are the questions that should be asked.

"Edges" boil down to a simple formula: time and effort. As mentioned earlier, eventually, you'll just know it when you see it. It's the recognition of an opportunity, for whatever reason, given the "wisdom" you've accumulated from your past experience. That's pretty much the whole ball of wax. BUT -- you need to recognize that face of opportunity before the majority acts on it. You are competing with other traders who have done nothing but watch prices move, day in, day out, for YEARS; what are you going to bring to the table that they don't know about? What is it that will get you to pull the trigger faster than they will (and in the right direction)? Your competition knows what you are going to do before you even realize you're thinking about doing it. An "efficient" market just means there are more f*ckers out to get you and each other, and therefore by the time you are pulling the trigger to enter a trade most others are already on their way out faster than you can say zerosum.

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Also Hi-Jack your excellent post from another thread here.

Very well said indeed! Thank you!

The true edge only lies in understanding how/why the price is making high/low of the day, the players, the market, time frame, levels. Should I get in on the other side ahead of everyone else or should I wait and get in after confirmation, etc. Time and effort is the only formula.

no disrespect to you or nodoji but we all know an edge is something far beyond chart patterns.

m&a, insider trading, algorithmic arbitrage, stock drift (also known as trends), and so on are examples of an edge per se.

just model it and backtest it for 5 to years in 500 symbols. i am pretty sure that when you add commissions and slippage the strategy would turn negative. obviously there will be some symbols that did fine but that doesn't mean they'll continue to do in the future. cherry picking in hindsight is obviously not an edge.

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Yup gotta know what's going on behing the scenes otherwise any "system" is garbage, just a honeytrap for Sunday Joe